Kontoor Brands, the parent company of iconic denim brands Wrangler and Lee, has announced impressive earnings for the third quarter, despite the challenges posed by the ongoing Covid-19 pandemic. The company’s net income for the quarter ending September 26, 2020, skyrocketed to $60.8 million, representing a remarkable 319% increase compared to the previous year. This resulted in earnings of $1.05 per diluted share, a significant surge from the $0.25 per diluted share reported during the same period in 2019.

Although Kontoor Brands faced a decline in revenues for the quarter, with a 9% drop to $583.2 million, the company skillfully managed its costs and operating expenses. Strategic measures implemented in response to the pandemic enabled Kontoor Brands to slash its total costs by 18% during this challenging period.

The decrease in revenues was primarily attributed to the impact of the pandemic, but was partially offset by promising growth in the digital channel, new business developments, and a shift in the timing of U.S. Wrangler shipments from the second to the third quarter, amounting to $33 million. While Wrangler experienced a 6% decline in revenues to $347 million, U.S. revenues for the brand actually increased by 2% during the period. In contrast, Lee encountered a global revenue decline of 8% to $214 million, despite a remarkable 10% rise in the U.S. market, driven by significant digital growth.

On the other hand, Kontoor Brands’ other businesses, such as the Rock & Republic brand and VF Outlet stores, suffered a substantial decline in global revenues, plunging by 43% to $22 million. Nevertheless, the company’s overall U.S. revenues remained steady at $455 million, thanks to robust digital sales and an astonishing 68% surge in digital wholesale revenues compared to the previous year. Owned e-commerce sales also witnessed a remarkable increase of 43%. Unfortunately, international revenues declined by 30% to $128 million, despite a gradual recovery in Europe and China throughout the quarter.

Scott Baxter, CEO and president of Kontoor Brands, expressed his satisfaction with the company’s performance, noting that their strategic actions successfully delivered strong results and supported a more profitable and sustainable growth model in the long term. The investments in brands, people, and partnerships contributed significantly to the positive impact on the company’s overall performance. Additionally, the initiatives focusing on restructuring, quality-of-sales, and mix shifts played a crucial role in solid gross margin increases.

Despite the remarkable performance in the third quarter, Kontoor Brands experienced a year-to-date decline in revenues of 24%, totaling $1.4 billion compared to $1.9 billion in the nine-month period of the previous year. Net income also took a hit, decreasing to $24.8 million, or $0.43 per diluted share, down from $67.9 million, or $1.19 per diluted share.

Looking forward to the fourth quarter, Kontoor Brands anticipates a sequential improvement from the third quarter, with the possibility of flat or modest year-over-year decline in revenues. Despite the ongoing challenges posed by the pandemic, the company remains optimistic about its ability to navigate through the uncertain market conditions and continue its growth trajectory.

In conclusion, Kontoor Brands has effectively managed to counterbalance the revenue declines caused by the Covid-19 pandemic through efficient expense management. Although the company experienced a decrease in revenues, its net income for the third quarter witnessed a substantial rise. Kontoor Brands remains committed to driving sustainable growth by investing in its brands, people, and partnerships, and expects to see improvement in the fourth quarter despite the ongoing challenges.

Useful links:
1. Kontoor Brands Official Website
2. Kontoor Brands Stock Performance